Kathmandu. KATHMANDU: The Ministry of Finance has prepared a draft of the Bill designed to amend and integrate laws related to public debt management-2083 and sought suggestions from stakeholders. Issuing a notice in line with the Legislation Act, 2081 BS, the Ministry has proposed new provisions to make public debt mobilization more systematic, effective and transparent.
In order to secure the recovery of the principal and interest of the loan investment made in public institutions or bodies, a provision has been proposed to receive direct payment through escrow account. As a result, the principal and interest of the foreign loan will be paid directly to the foreign creditor and there will be no additional burden on the federal reserve fund.
The government has widened the scope of primary issuance of government bonds and can be purchased by domestic or foreign individuals and entities.
A legal basis has been prepared for the issuance of subject sector bonds (such as green bonds or project base bonds) for climate adaptation or innovative infrastructure to be listed in the national and international markets.
For the first time, provision has been included in the Act to use financial instruments related to hedging to reduce the risk of exchange rate and interest rate that may occur while paying principal or interest in foreign currency.
The government has clearly specified the areas for investing in shares or loans and the areas that cannot be invested. Public enterprises wholly or controllly owned by the Government of Nepal, partnerships with multinational companies in national priority industries under public-private partnerships, institutions established under bilateral agreements and intergovernmental multinational agencies with Nepal as members.
Government investment in alcohol, tobacco industry, casinos, gambling houses and foreign employment businesses will be completely banned, except for preferential shares to give loans to individuals, loans to multinational organizations, and preferential share to invest in debt instruments in the stock market.
To recover the principal and interest from the borrowers who have not paid the loans, the Office can take stringent steps like sending reminders, making commitments, freezing bank accounts, freezing movable and immovable assets and directing them to deduct the amount received from other bodies.
If any institution goes into liquidation or is scrapped, the provision of writing off the loan as per the decision of the Council of Ministers has also been added.
Instead of a physical certificate, the details of the bonds will be made available to the holders of government bonds through the electronic system Demat Portfolio.
A legal provision has been proposed to freeze or release the bonds at the request of the competent authority, court or banks and financial institutions.
Any person or institution involved in colluding in the bidding process for raising domestic debt and influencing the interest rate or influencing the system by making negligent entry will be liable to a fine of Rs 10,000 to Rs 100,000 for the first time with a warning for the first time and a fine of Rs 10,00,000 for the second time and banned from participating in the bidding process for one year.
The Ministry of Finance has urged the government to send any suggestions on the draft of the bill to the email of the Ministry or to the Economic Policy Analysis Division by July 23.
